Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index.

  The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds in the Lucror Asia HY index. 

Asia HY Trade Book - October 2021 - Lucror Analytics

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.<ul><li><a href='#lucror-entity-7613'>China Aoyuan Property</a></li><li><a href='#lucror-entity-8108'>Hopson Development</a></li><li><a href='#lucror-entity-14896'>Jingrui Holdings</a></li><li><a href='#lucror-entity-4153'>Shui On Land</a></li></ul>

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.China Aoyuan PropertyHopson DevelopmentJingrui HoldingsShui On Land

Morning Views Asia: China Aoyuan Property, Hopson Development, Jingrui Holdings, Shui On Land

In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults. The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related lockdowns on the residential, commercial and industrial property markets. We also provide an overview of recent bond defaults.   The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the "In-Focus" section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market. 

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

APAC IPOs & Placements, Aequitas Research

Clarence Chu

APAC IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Shui on Xintiandi / Equity Capital Markets

Shui on Xintiandi is looking to raise up to US$500m in its upcoming Hong Kong IPO. The deal will be run by Morgan Stanley and UBS.Shui on Xintiandi is a leading investor and manager of commercial properties in the PRC. As per Knight Frank, it is one of the largest private commercial property owners and operators in Shanghai by total gross floor area (GFA). As of Jun 2021, the firm had a portfolio of 13 commercial properties which occupied 2m sqm of GFA, and had a combined valuation of RMB53.1bn. Its properties are spread across Shanghai, Wuhan, Nanjing, Foshan and Chongqing, where Shanghai properties accounted for 52.7% and 71.9% of total GFA and valuation, respectively.

Shui on Xintiandi is looking to raise up to US$500m in its upcoming Hong Kong IPO. The deal will be run by Morgan Stanley and UBS.Shui on Xintiandi is a leading investor and manager of commercial properties in the PRC. As per Knight Frank, it is one of the largest private commercial property owners and operators in Shanghai by total gross floor area (GFA). As of Jun 2021, the firm had a portfolio of 13 commercial properties which occupied 2m sqm of GFA, and had a combined valuation of RMB53.1bn. Its properties are spread across Shanghai, Wuhan, Nanjing, Foshan and Chongqing, where Shanghai properties accounted for 52.7% and 71.9% of total GFA and valuation, respectively.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

On the 13 September, PRC property developer <a href="https://www.smartkarma.com/entities/shui-on-land-ltd" target="_blank" data-smartkarma-citation="entities:4153:1" rel="noopener">Shui On Land (272 HK)</a><a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0913/2021091301588.pdf" target="_blank" rel="noopener">announced</a> the proposed spin-off and listing various property interests in China, under the banner Shui On Xintiandi. 
This is Shui On's second attempt to list Xintiandi, having first proposed a listing on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2012/0528/ltn20120528480.pdf" target="_blank" rel="noopener">28 May 2012</a>.  That spin-off was ultimately abandoned, but not before Brookfield Property invested US$500mn in convertible perpetual securities on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2013/1031/ltn20131031185.pdf" target="_blank" rel="noopener">31 October 2013</a>, and once exercised on the <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2015/0902/ltn20150902780.pdf" target="_blank" rel="noopener">2 September 2015</a>, gave Brookfield a 21.894% stake in Xintiandi. 
On the 28 December 2018, Shui On <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2018/1231/ltn20181231087.pdf" target="_blank" rel="noopener">bought out</a> Brookfield's share for HK$4.073bn. This implied a fair value for Xintiandi of HK$18.6bn. With a NAV of HK$17.4bn (as at 31 Dec 2017), Shui On paid an implied P/B of 1.07x. 
Since 15 March 2019, Xintiandi has been a wholly-owned subsidiary of Shui On Land.
<hr>
<h3>The Proposal</h3>
<ul>
<li>A portfolio of the company's 13 completed commercial assets, including Shanghai Xintiandi, will be transferred to Shui On Xintiandi. The new company will primarily be engaged in the investment in and ownership of commercial properties, as well as property management and asset management in China.</li>
<li>
<a href="https://www1.hkexnews.hk/app/sehk/2021/103811/documents/sehk21091301509.pdf" target="_blank" rel="noopener">Here</a> is the red herring.</li>
<li>Shui On Land will continue its focus on the master plan and development of mixed-use communities and properties as well as the sale of developed properties at such communities.</li>
<li>The 13 properties have a total GFA of 2mn sqm, 52.7% of which are located in Shanghai. 64.4% and 35.6% of the total GFA of the properties (excluding carparks and other spaces) are retail and office properties, respectively.</li>
<li>The properties have a total value of RMB53.2bn (assessed by Knight Frank), 71.9% of which are located in Shanghai. 58.1% and 41.9% of the total value of the properties (excluding carparks and other spaces) are derived from retail and office properties, respectively.</li>
</ul>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/049/original/image_62227833871631765506668.png?1631765506" class="editor-image img-responsive" data-smartkarma-image-id="230049"></figure>
<div class="content-caption">Source:<a href="https://www1.hkexnews.hk/app/sehk/2021/103811/documents/sehk21091301509.pdf" target="_blank" rel="noopener"> page 94</a>
</div>
<ul>
<li>The chart below shows the mix of property types as at 30 June 2021.</li>
</ul>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/100/original/image_736295179111631777987271.png?1631777986" class="editor-image img-responsive" data-smartkarma-image-id="230100"></figure>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/230/101/original/image_869881186121631778033210.png?1631778032" class="editor-image img-responsive" data-smartkarma-image-id="230101"></figure>
<div class="content-caption">Source: <a href="https://www1.hkexnews.hk/app/sehk/2021/103811/documents/sehk21091301509.pdf" target="_blank" rel="noopener">page 96 &amp; 97</a>
</div>
<ul>
<li>An EGM will be convened to allow shareholders to vote on the spin-off. This should be a simple majority vote. Shui On Company Limited, with 55.68% of shares out in Shui On, has provided an irrevocable undertaking to vote in favour of the spin-off resolution, so that's done. Provided listing conditions are suitable, listing could take place early next year. </li>
</ul>
<blockquote>
The Board intends that, subject to completion of the Proposed Spin-off and the Proposed Listing, a Special Dividend be distributed to the Shareholders after completion of the Proposed Spin-off and the Proposed Listing.
</blockquote>
More below the fold.

On the 13 September, PRC property developer Shui On Land (272 HK)announced the proposed spin-off and listing various property interests in China, under the banner Shui On Xintiandi. 
This is Shui On's second attempt to list Xintiandi, having first proposed a listing on the 28 May 2012.  That spin-off was ultimately abandoned, but not before Brookfield Property invested US$500mn in convertible perpetual securities on the 31 October 2013, and once exercised on the 2 September 2015, gave Brookfield a 21.894% stake in Xintiandi. 
On the 28 December 2018, Shui On bought out Brookfield's share for HK$4.073bn. This implied a fair value for Xintiandi of HK$18.6bn. With a NAV of HK$17.4bn (as at 31 Dec 2017), Shui On paid an implied P/B of 1.07x. 
Since 15 March 2019, Xintiandi has been a wholly-owned subsidiary of Shui On Land.

The Proposal

A portfolio of the company's 13 completed commercial assets, including Shanghai Xintiandi, will be transferred to Shui On Xintiandi. The new company will primarily be engaged in the investment in and ownership of commercial properties, as well as property management and asset management in China.

Here is the red herring.
Shui On Land will continue its focus on the master plan and development of mixed-use communities and properties as well as the sale of developed properties at such communities.
The 13 properties have a total GFA of 2mn sqm, 52.7% of which are located in Shanghai. 64.4% and 35.6% of the total GFA of the properties (excluding carparks and other spaces) are retail and office properties, respectively.
The properties have a total value of RMB53.2bn (assessed by Knight Frank), 71.9% of which are located in Shanghai. 58.1% and 41.9% of the total value of the properties (excluding carparks and other spaces) are derived from retail and office properties, respectively.


Source: page 94


The chart below shows the mix of property types as at 30 June 2021.



Source: page 96 &amp; 97


An EGM will be convened to allow shareholders to vote on the spin-off. This should be a simple majority vote. Shui On Company Limited, with 55.68% of shares out in Shui On, has provided an irrevocable undertaking to vote in favour of the spin-off resolution, so that's done. Provided listing conditions are suitable, listing could take place early next year. 


The Board intends that, subject to completion of the Proposed Spin-off and the Proposed Listing, a Special Dividend be distributed to the Shareholders after completion of the Proposed Spin-off and the Proposed Listing.

More below the fold. 

Shui On Land (272 HK)'s Xintiandi Spin-Off

China

Shui On Land Limited engages principally in the development, sale, leasing, management and ownership of residential, office, retail, entertainment and cultural properties in the PRC.

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Shui On Land (272 HK)

Asia HY Trade Book - October 2021 - Lucror Analytics

The Asia HY Trade Book for the month of October includes a summary of our recommendations, as well as our high-conviction ideas. The report also...

Lucror Analytics

Morning Views Asia: China Aoyuan Property, Hopson Development, Jingrui Holdings, Shui On Land

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

Asia HY Monthly - Indonesian Real Estate Market Update - Lucror Analytics

In this month’s "In-Focus" section, we discuss the Indonesian real estate market, including the impact of the COVID-19 pandemic and related...

Lucror Analytics

Shui on Xintiandi Pre-IPO Tearsheet

Shui on Xintiandi is looking to raise up to US$500m in its upcoming Hong Kong IPO. The deal will be run by Morgan Stanley and UBS.

Clarence Chu

Shui On Land (272 HK)'s Xintiandi Spin-Off

I'm not confident the valuation assigned to the spin-off company plus the remaining ops, together with a holding company discount, would suggest...

David Blennerhassett

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